The Karachi Electric Supply Corporation (KESC) has calculated a loss of Rs 1,843 million in 12 months ending March 2006. This was stated by KESC in a recently filed petition with National Electricity Power Regulatory Authority (Nepra) asking for revision of quarterly fuel price adjustment mechanism approved by the Authority in its determination on KESC tariff petition in September 2002.
The KESC worked out Rs 1,471 million revenue loss in last nine months. In January-March 2005 KESC suffered revenue loss of Rs 124 million. In April-June 2005 it suffered revenue loss of Rs 644 million, and in July-September 2005 revenue losses were to the tune of Rs 703 million.
The KESC expected to suffer revenue loss of Rs 372 million in January-March 2006, thus a total loss of Rs 1,843 million in one year.
The KESC noted that the purpose of the tariff adjustment mechanism was to pass on the effect of variation in cost of fuel and power purchases. To avoid the burden on consumers, quarterly maximum limit of 4 percent increased in the said structure. As such, the left over balance is carried forward to next quarter. Accordingly, the price of fuel for the next three quarters is to be based on price in the last quarter.
However, KESC says that it has been experienced that the left over balance above 4 percent is a hindrance in recovery of additional cost and a huge burden has to be born by the corporation itself.
KESC noted that as per quarterly adjustment mechanism, if the allowed increase/decrease in average sale rate due to fuel price variation in a certain quarter is greater than 4 percent of the prevailing average sale rate, the adjustment will be restricted to 4 percent (2.5 percent for fuel and 1.5 percent for power purchase) and remaining burden/relief shall be carried forward to the next quarterly adjustment.
KESC has claimed that it has sustained the entire burden of gas price increased on January 1,2006 which is a significant amount. The new price of gas from January 1, 2006, as notified by Ogra, is Rs 240.91 mmbtu as against Rs 208.91 mmbtu in the last quarter.
It pointed out that it has to make payment of gas bills at new price with effect from January 2006 which has not been considered for quarterly determination.
Taking into account the increased price of gas the required tariff increase would have been Rs 18.87/kWh as against determined rate of minus 0.58/kWh ie short by Rs 19.45/kWH . Hence KESC will lose revenue of Rs 400 million in first quarter of 2006 due to non-reflection of new price of gas.
In its petition, the KESC has demanded waiver of the maximum limit of 4 percent presently applicable for increase/decrease in tariff through quarterly adjustments, due to fuel prices variations.
The KESC also demanded change in price mechanism of gas for the next three-quarters. At present, the last gas price of the past quarter is applicable to the next three quarters.
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